Saturn's second chance GM's long-neglected stepchild is getting another opportunity - probably its last - to prove itself.
NEW YORK (Fortune) -- When former General Motors chairman Roger Smith dreamed up Saturn in the 1980s, he envisioned a stand-alone small car company remote from the problems of bureaucratic GM that would sell 500,000 cars a year. But Smith retired in 1990 and his successors didn't see it that way. They took away Saturn's independence and starved it of new models. After losing billions of dollars, Saturn was struggling along with old designs a few years ago when GM (Charts) decided to give it another chance. It invested $3 billion, borrowed some design themes from its German brand Opel, and sent it out to fight again. Now that the new Saturns have started reaching dealers, it is time to begin assessing whether GM's billion-dollar bet has paid off. The results to date are encouraging - but mixed. The first step to redemption is admitting failure, and the most positive sign at Saturn is that GM's management is willing to publicly acknowledge that it screwed up. "People in our own company have been confused about this brand," confessed Saturn boss Jill Lajdziak (pronounced LAY-jack) at a meeting of the International Motor Press Association in New York last week. "We didn't grow the product portfolio and the product didn't evolve for a decade." Saturn's new advertising slogan -- "Like always. Like never before" -- also contains a hint of contrition. The next step is the reality behind the promises. Making up for lost time in a hurry, Saturn is launching three all-new vehicles this year and a fourth in 2007. The first two have been well received, though they haven't broken much new ground.
New models are the mother's milk of the car business, so Saturn's sales next year will be turbocharged. Giving them some added punch, Saturn has been designated GM's green brand. It will shortly begin selling the Vue Green Line, known as a mild hybrid, at the bargain price of $23,000. Proving that there is no such thing as a free lunch, the Green Line was savaged in a review in Car & Driver as "less hybrid for less money." The magazine found that the Vue hybrid got only 25 miles per gallon vs. 37 mpg for the hybrid Toyota (Charts) Camry. In 2007, Saturn will begin selling a similarly mild hybrid version of the Aura. Better news for Saturn is its success at bringing in buyers who wouldn't ordinarily consider GM products. Lajdziak contends that 62 percent of Saturn buyers are plus business. She's more reluctant to talk about profit. As a stand-alone operation, Saturn was uneconomic because it lacked scale. Now it has adopted a totally new business model that integrates it into GM's global engineering and manufacturing operations. That's important because GM no longer has the luxury of operating it simply to pull in customers who usually only consider imports. But for Saturn to make money, it also has to continue to move away from the small cars where it got its start and into more profitable segments. The Outlook is a move in that direction but Saturn will have to avoid stepping on the toes of other divisions. For her part, Lajdziak is showing admirable flexibility. Asked whether Saturn would ever get into the highly-profitable pickup truck business, she ruled out a fullsize model like those sold by Chevy and GMC but left open the possibility of a crossover pickup on a car platform like the Honda (Charts) Ridgeline. Saturn will need more of that creative thinking if it ever is to make a significant contribution to its corporate parent -- and even partially live up to the dream of its founder. _________________ Saturn Aura: GM aims high, scores big Saturn's cars are getting sleek and edgy, but the company swears it'll stay warm and fuzzy. Last Taurus rolls off the line: Say goodbye to the sedan that was a best-seller in the 1990s and helped revitalize Ford (Charts). |
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